Peter Arduini, new CEO of Enterprise Drive-based Integra Lifesciences, has high hopes for where he expects the company to go under his aegis.
Integra is a solidly midsize company in a world where most businesses are either very big or very small. Arduini, who in January was appointed CEO, does not see this as a permanent condition. “Our goal is to become a multibillion-dollar company, and we’re going to accomplish this through a combination of organic, self-built initiatives and products and taking the expertise we have in business development and accelerating that,” he says.
When Arduini came to Integra in November, 2010, as president and COO, he was excited about the company’s identity as a diversified healthcare company, combining orthopedic and neurosurgery products — driven by the company’s expertise in regenerative medicine — and medical instruments
Integra was founded in 1989, not with a product but with a vision — Richard Caruso’s dream of finding a way for humans to regenerate their own tissues and organs. Pulling together companies and technologies, Caruso facilitated the creation of a highly purified collagen scaffold technology, an “artificial skin,” which is used to repair the dura mater (the thick membrane around the brain), nerves, and tendons, and that helps regenerate skin and bone.
In 1999 this small, struggling company that was hemorrhaging about $10 million a year pulled off a minor coup — it acquired Neurocare, a profitable company that had more employees than Integra and over twice its revenues. What Integra was looking for from NeuroCare was not so much its technology but its commercial infrastructure: NeuroCare already had a portfolio of products that its salespeople were marketing to neurosurgeons, and it was easy for them to add Integra’s newly launched DuraGen product to the mix.
Under the leadership of Stuart Essig, who came on board as chief executive officer in 1998, acquisitions and product development continued, and its sales have grown from $655 million in 2008 to expected revenue of over $800 million in 2012. The company now has more than 3,400 employees, including about 650 in Plainsboro, and expects 5 to 7 percent revenue growth for 2012.
What Integra means by regenerative medicine are the surgical implants derived from its proprietary collagen matrix technology and other biologic platforms. Its matrix products are built from collagen, the basic structural protein that binds cells together in the body. The collagen is used in Integra’s products to provide a scaffold that supports the infiltration of the patient’s own cells and the growth of blood vessels.
Eventually, those infiltrating cells consume the collagen of the matrix and promote the development a new matrix by the patient. In 2011 some 20 percent of Integra’s income came from regenerative medicine products for repair of the dura mater, dermis, peripheral nerves, tendon, or bone.
The company’s orthopedic business, which includes products for spine and extremity repair, contributed about 40 percent to Integra’s total revenue in 2011. The extremity reconstruction segment comprises products for the repair of soft tissue, including wounds like pressure ulcers and diabetic foot ulcers as well as nerves and tendons, and devices for orthopedic reconstruction of bones and joints. This business is growing by double digits, notes Arduini.
Its newer spinal business, which Arduini says is adding products and expanding, includes technologies for spinal fusion to treat degenerative disk disease and other disorders and orthobiotics, which include demineralized bone products, collagen ceramic matrices, and pure synthetic bone grafting solutions.
In neurosurgery, which is one of Integra’s oldest product lines, the company has a leadership position in the United States. “For anyone who has had a craniotomy, a brain tumor, or an implant for epilepsy, our products likely played a leading role in diagnosing and treating it,” says Arduini.
The company’s neurosurgery product portfolio includes products to repair the dura, as well as devices to manage the draining of cerebral spinal fluid, tissue ablation equipment, and other monitoring and stabilization equipment. Integra’s neurology business contributed about 40 percent to total 2011 revenue.
According to Arduini, Integra is also the leader in the United States in all types of reusable surgical instruments.
“For any doctor you go to in the U.S., the probability that an instrument they use has Integra branding or naming on it is a 30 to 40 percent chance,” says Arduini. “We sell into every doctor’s office and major hospital.”
The company expanded its device business into the peripheral area of lighting, last year adding new LED surgery headlights, fueled by a battery pack, that do not need to be tethered to the wall. The units have been fine-tuned to project the intensity and light quality characteristic of existing plug-in units.
“I think we have the only product on the market with this quality of light,” says Arduini. Because surgeons must switch from side to side during surgery, these LED lamps are much easier to use, he says. Integra is number one in the United States in surgical headlight systems.
Arduini says several elements are driving Integra’s growth. The first is product expansion, which is happening via acquisitions, internal product development, and in-licensing.
Last year the company acquired two companies that together brought some 30 new products into the Integra product line. SeaSpine, a Vista, CA, firm that develops and distributes spinal fixation products, effectively doubled Integra’s footprint and customer base in the United States spine hardware market.
Ascension Orthopedics, based in Austin, TX, develops and distributes a complementary range of implants for the shoulder, elbow, wrist, hand, foot, and ankle. Its acquisition both provides the company with a new entry into the fast-growing shoulder market and also contributes a new proprietary PyroCarbon technology to the company’s product line. Arduini also sees good opportunities for future acquisitions.
The company plans to develop 10 new products internally. For example, it is now developing new monitors used in neuro-critical care and new capabilities in its Durogen product line, which is used to seal the sac that keeps the fluids around the brain together.
Another means for product expansion involves in-licensing. “Because we have a large sales force — the largest dedicated neurosurgery sales force in the United States — we have a great opportunity to in-license and bring other products into the portfolio,” says Arduini. “Having the presence, the brand, and the call point makes Integra attractive to small biotechs who have a neurosurgery product but don’t have the sales and marketing capability to promote it.”
In addition to product expansion, Integra is fueling its growth by expanding distribution and sales, adding both direct salespeople and distributors.
Integra is also expanding its capacity to support growth. Currently it has more than 20 manufacturing facilities, 15 distribution centers, as well as sales and access offices in many countries around the world, and expects to make about $3 million in capital expenditures for facility upgrades.
Integra’s principal executive offices are located in Plainsboro and its other sites range across five states — California, Massachusetts, New Jersey, Ohio, Pennsylvania — and around the world, including facilities in Western Europe, Mexico, Puerto Rico, Australia, and Canada.
The Plainsboro site makes skin, nerve, and tendon products for orthopedics and extremity reconstruction, duraplasty products for neurosurgery, and collagen private label products; and Integra is expanding its manufacturing capability by renovating a 58,000-square-foot building at 9 Morgan Lane.
The new facility is expected to open later this year, and Integra will be hiring new employees as well as transferring positions from the current building.
Integra also has four research and training facilities in the United States that train both Integra employees and surgeon clients. They are the Center for Research, Education, and Training in Irvine, CA, serving the company’s orthopedics business; a training center in Carlsbad, near San Diego, that focuses on metal implants; Ohio facilities focusing on metal products for spinal implants; and the Plainsboro campus.
Whereas many companies go to outside groups to train their customers, Integra prefers to do training internally to help its customers understand different clinical aspects of and approaches to its products. “We think it is important that we have that relationship with our customers,” says Arduini.
The last spur to revenue growth will be a strong effort to increase the company’s international presence. With the company’s 2011 sales in the United States at roughly 76 percent, and the remainder in Europe, Asia Pacific, and other foreign venues, Arduini sees international expansion as an exciting opportunity. “Many of our products, without many changes done, are directly applicable in international markets like China, Brazil, and Western Europe,” he says.
Latin America and Asia, he says, are the markets with the biggest growth opportunities, and the company has hired employees both overseas and in the United States to support international growth. Call centers in Plainsboro will support this growth by taking and processing orders from Integra’s distributors.
To promote international sales, the company is developing country-by-country strategies to register its products, obtain the right licenses and approvals from each government, and open offices and establish legal entities. Last fall Integra opened its first office in China, and is expecting good growth this year in the Chinese, Brazilian, and Indian markets.
Integra’s strengths include the many cross-synergies created by its diversified product mix. In terms of product, for example, dura, skin, and spine repair use the same core collagen matrix.
Synergies also exist in terms of sales channels because surgeons may work in more than one area. “In spinal surgery half is done by neurosurgeons,” says Arduini, who notes that Integra’s strong relationship with neurosurgeons also gives the company access to spinal surgeons. Similarly, orthopedic surgeons may work both on spine and extremities.
The company also began using the sales teams from both its Instrument and Neuro divisions to sell its Ruggles brand neuro instruments
“The combined channels represent one of the largest neuro-selling efforts in the U.S. market,” says Arduini. “Based on growing success, we’ll continue to explore synergies across divisions, where our instrument products/sales team can prove a complement to one of our specialty markets.”
Further, the significant brand awareness of Integra’s products within the sectors it serves creates synergies with manufacturers of related technologies that are looking to partner with a company that already has a strong sales and distribution network.
But for a company to prepare for the kind of growth that Arduini envisions, it must prepare internally as well as externally. Because effective and efficient business processes can be as important as product development and marketing, Integra is also focusing on initiatives to streamline the way the company is run and to optimize its business processes.
Because Integra has acquired so many companies, running under different systems, the company has invested in one common enterprise resource planning system to integrate management and financial information across the entire organization. Designed over the last nine months, the system is being tested and piloted this year and will roll out worldwide through 2013.
This more integrated and simplified system will allow managers to look at the company through different lenses and more easily grasp what is going on. “As we grow in countries abroad and develop more product, it will help take the complexity out of the company and allow us to be quick in making decisions and allocating resources,” says Arduini.
As important as business processes are, the real center of a successful company is its people, and Integra has been focusing on new training and development programs to prepare its staff to guide Integra’s expected growth.
In particular, the company has been working on succession planning — taking a look at people’s careers early on and getting them positioned so that they have the experience and knowledge to take on the roles the company will need. “One of our biggest challenges is being able to recruit and develop the right talent and people to take the company to that level,” says Arduini.
Arduini maintains that careers at Integra are more interesting than those in the world of big pharma, where a person often spends most of his or her career in a particular function or role.
Describing Integra’s approach to employee development, Arduini says, “we try to instill an entrepreneurial spirit. People are exposed to different product areas and functional areas, and this crosspollination can build stronger leaders and can make your job more fun.” Because of Integra’s diverse offerings, an employee might be working on neurosurgery one day, orthopedics the next, and the day after turn to international issues.
Arduini is from Jersey Shore — not the sea shore of New Jersey but rather a small town by that name near Williamsport, PA.
His parents were both immigrants, his mother a mixture of Scottish and Irish and his father from outside Rome, Italy. His father worked for nearly 50 years for the railroad that started as New York Central, then became Penn Central and finally Conrail.
Suggesting some truth behind a joke about families with an immigrant mentality having big gardens, Arduini notes that his first experience in sales was as a small child selling vegetables at a roadside fruit stand. “The business of transacting and growing things in more ways than vegetables was something I did as a kid,” he says, adding that the three major values in his growing years were hard work, family, and faith.
At Susquehanna University, he earned a degree in marketing. “When I was in school, I was intrigued by business,” he says. “Growing up I was involved in sports and so the competitive side of business aligned quite well.”
Arduini then obtained a master of business administration from Northwestern University’s Kellogg School of Management, where he studied both finance and leadership.
Arduini started his career at a domestic product company, Procter & Gamble, where he spent four years in various sales and marketing positions and received training in leadership and other skills.
In his 15 years at GE Healthcare, Arduini served as general manager of USA sales for the company’s diagnostic imaging business, then was global general manager of GE Medical’s services business, and finally general manager of its global functional and computed tomography business.
In 2005 Arduini joined Baxter Healthcare and served as corporate vice president and president of its $5 billion medication delivery division, with a team of about 4,000 employees. The division was responsible for diversified products ranging from IV solutions and medical devices to pharmaceuticals, of which about half were sold outside the United States. The division was about 70 percent pharma and 30 percent medical technology.
“At all three companies I had good mentors as well as good exposure to operations,” says Arduini, who suggests that this background left him well prepared for Integra and its diversified business. Arduini joined Integra, where he is also a director, looking to grow the company, develop its products, and help sell them internationally.
When Arduini was ready to leave Baxter, he says he had the opportunity to leave the healthcare industry for aircraft or construction, but he was intrigued by Integra, and more broadly by the healthcare industry.
“There’s one thing about healthcare; it is the very rare industry where you can personally do well by doing good — even on your worst day thousands and thousands of people are living better lives because of the products we make and are alive because of the work we do,” he says. Integra also had another draw for Arduini; after spending time in Chicago, Milwaukee, and Europe, he says it is nice to be within driving distance of his family.
Arduini is committed to New Jersey. “Clearly there are things about all states that we would love to change and tweak, but we’ve been happy in New Jersey,” he says. “One thing about New Jersey — it has been a great pool for talent. We’ve been able to differentiate ourselves and show we are a great place to have a career and it can be satisfying in the long term.”
Although he would love to see more flexibility in taxes, he likes what the state government has been doing to change its business environment, and he has no plans to move. “We made a bet that we will have good results with a good pipeline of talent, and we’re expanding in New Jersey,” he says.
Looking toward a future when the company’s revenues are in the multibillions, Arduini sees the new enterprise planning system and employee development as essential. “This is one of the areas that will help differentiate us in the future,” he says, “how we run the company and the type of talent we are able to attract and give opportunities that they might not get at other companies that are run differently.”
As with any other healthcare company, Integra faces some challenges, including markets that are in flux and activity in healthcare reform that is creating uncertainty in some markets. Integra also has some serious competitors, including Johnson & Johnson, Globus Medical, Stryker Corporation, and Medtronic, among others. And the growth prospects for Western Europe have been less robust than in the past. But Arduini maintains that Integra is in a good position. “For a company of our size with our diversity, we have lots of opportunities to grow,” he says.
“The bigger message is that we’re a diversified medical technology company that is mid cap and that has plans to become a multibillion dollar company and expand internationally and grow with good use of science and commercial capabilities. We’re excited about bringing more people into the company who have a passion for what we do.”
Integra LifeSciences Holdings Corporation (IART), 313 Enterprise Drive, Plainsboro 08536; 609-936-3600; fax, 609-275-5363. Peter Arduini, CEO. www.integralife.com.